Market insight

Christmas is perhaps the only time of year where families embrace our passion for wine, but just occasionally we may get a bit carried away. So in the warmest of Christmas’ spirits, we offer you ten tips to keep everyone merry over the next few days.

Champagne shows you’re trying. People see the magic word and relax in the knowledge that everything’s going to be all right. You do not want to start the festivities having to explain how rare and expensive your alternative sparkler is.

Your mother-in-law must have her usual. Whatever it is. It is not about good manners; it is about world peace. (And it will cut off at the pass any attempt to open your bottle of Louis XIII brandy).

The cook’s glass must never be empty. Def Con is at level 5 over the festive season, primarily due to the cook’s fear of missing out.

Extraordinarily, some people may feel the food is more important than the wine. Once you have carefully laid out glasses for champagne, white burgundy, red burgundy, claret, pudding wine and port, you may just want to check where the plates will go.

Beer shows you’re a man of the people and not some wine snob. Don’t stint on the quality or quantity - if Uncle Tom were drinking your Chambolle, it would be a darn sight more distressing.

There is a reason the waiter uses the simple lever corkscrew. Proudly bringing out the dual-powered, multi-functional Super Deluxe digitised Wine Opener for that magnum of Leoville-Barton '61 is at the very least reckless.

Plan ahead. Your gently slumbering 1963 Quinta do Noval will need to stand upright for a couple of days to allow the sediment to settle.

Decanting is not always showing off. Crunchy is not a wine descriptor you want applied to 50 year old port.

The first was Martin Brown, CEO of Wine-Searcher, speaking at a conference in California, noting that increased pricing transparency had not caused market prices of wine to fall.

He wasn’t referring to just fine wine or collectible wine, but rather the effect of his price comparison site on retail prices and the wine market as a whole. I’m paraphrasing, and you can read the whole of the discussion on their blog.

The second was the news that Stanley Gibbons, the stamp specialist and now owner of a group encompassing antiques specialist Malletts and auctioneer Drewetts, has seen it share price tank over the last year (see chart).

Let’s begin with Stanley Gibbons and the stamp market.

STANLEY GIBBONS GROUP PLC ORD 1P

The share price tanked in part because of how it reported revenues from the sale of ‘plans’ in investment grade stamps.

Like fine wine, stamps are a collectible. Unlike fine wine, there is a great deal less price transparency in the stamp market.

As a consequence, Stanley Gibbons used to offer collectible stamp buyers a buy back scheme, whereby the company itself guaranteed the purchaser 75% of their original investment back if the value of the stamps purchased through their Capital Protected Growth Plan fell over a 5-10 year period.

Since the repurchase scheme booked stamps onto their balance sheet at a discounted rate to their own retail catalogue rather than at cost, its auditor has estimated the potential balance sheet liability (and asset write-downs) to be £64M.

Collectible markets are relatively illiquid, in large part because the things that people collect are rarely fungible*.

But just because a market isn’t fungible or liquid doesn’t mean it can’t benefit from price and market transparency. Not to mention direct market access.

The nature of a trading collectible market, as the Stanley Gibbons example highlights, is that very rare examples are quite hard to estimate, whilst more liquid collectibles will tend to sell within or just below the lowest cluster of available market offers for sale.

Onto Martin Brown’s speech on price transparency

Wine-Searcher has done a great job of price comparison and substantially improving price transparency, so that no matter where in the world you are, it’s easy to get a price for and find the wine you want.

The key point is that price transparency has not driven down retail wine pricing, contrary to economic theory, but it has substantially reduced price outliers, both high and low.

Actionable data

Wine Owners works with Wine-Searcher, receiving tens of millions of price point as the building blocks of our Market Level price – the price at which it’s likely a wine will find ready buyers (or the approximate point of market liquidity). That data is combined with traded wine prices and for the rarest wines in the world we’ll be cross-referencing with auction data from the biggest Houses.

Blue chip fine wine behaves like collectible markets, not like CPG markets. Production and therefore supply is limited. Where there is no demand prices fall or stagnate, but where there is a ready market of buyers, prices rise. Just as you’d expect.

In fact, price discovery is the underpinning of all successful and proper-functioning trading markets.

Combine market transparency based on realistic selling prices with direct market access that allows all market participants to buy and sell on a peer-to-peer basis, and the effect is entirely beneficial. Consumers get the opportunity to sell through their wines across the entire spectrum from interesting drinking bottles to desirable blue chips. Buyers can buy the wines they love to drink or to accumulate as a store of value from fellow wine lovers and collectors with little added market friction due to modest commissions. Counter parties’ confidence to trade is assisted by price transparency and all the settlement and logistics support we offer through the platform.

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* The word fungible is used in relation to a category of asset that is indivisible from each other. Pure gold and shocks and shares are indivisible. One of each is the exactly the same as the next. Collectibles are not fungible. In wine the things that make a difference are storage, fill levels, the condition of labels, capsules, and where the wine has been (wine that’s made the journey from Bordeaux to London to Hong Kong and back again doesn’t give buyers the same quality of juice as Bordeaux to Octavian for example).

2015 is the best Northern Rhone vintage in 55 years, according to this article on JancisRobinson.com. That’s some statement given the quality of vintages over the last 15 years or so, including the superb 1999, which at the top end is just coming into its drinking window.

Great though 2015 is, it isn’t going to satisfy drinking requirements in the short term, even at more modest levels, whereas my bottle of Chave Offerus (St. Joseph) 1999 is melt-in-the-mouth gorgeous now.

Outside of the Rhone elite and their blue chip labels that can appreciate markedly in value over the medium-to-longer term, along with some of the region’s special cuvees and bottlings, these are not wines to use as a store of value. They do not appreciate in value. They are wines to enjoy. But they need time to come around. As impressive as new vintages are, they express in youth only a general sense of the wine they will become.

In our estimation these are wines that are depressingly under-appreciated. As you’d expect from such a large region of production, styles vary enormously. They variously show varietal character, complexity, precision, texture, and depth of flavour with more than just a touch of minerality.

If you’ve not tasted mature white Rhone recently, you could well find the waxy texture, floral and white peach character refreshingly braided with acidity an exciting experience. For the quality and complexity these great wines offer, many are cheap. Not a word I use lightly, but they really are terrific value and hold their own in the company of any of the world’s great whites.

Though it’s tempting to buy into great new releases, and potentially worthwhile at the top of the tree, there’s no kudos in hanging onto cases of wine and paying a decade or two’s worth of storage, when you can drink the real thing without playing stockholder.

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